Investors Claim Refunds After Land Proves Worthless

Land speculation is--literally--as old as the hills and so are its risks and pitfalls for consumers.

Witness a recent case brought by state prosecutors against an Orange County land-auction company.

The Santa Cruz County district attorney’s office accused Irvine-based Land Disposition Co. of misleading customers, persuading them to buy worthless lots in a craggy area outside Santa Cruz.

At least 10 investors sank up to $10,000 apiece into properties in “paper” subdivisions--developments that exist only on paper--in the San Lorenzo Valley, prosecutors said.

County maps from the 1910s showed that roads had been put in and that homes could be built there. Problem is, no such roads had been constructed, prosecutors said. The area also lacked water and sewer infrastructure.

Land Disposition executives said they, too, were taken in by the erroneous maps. In March, the company settled the district attorney’s charges by “cheerfully” agreeing to repay buyers who complained to the state, vice president Jeffrey Frieden said. The company did not admit wrongdoing in settling the case.

So far, at least five buyers have claimed refunds totaling about $30,000, Frieden said. Buyers have until April 1, 2000, to reclaim their investments. Land Disposition Co. hosts sales four to five times annually, auctioning off about 200 properties per event.

The brochure for each sale urges would-be buyers to check out personally any property they are considering, even those in remote areas like the Santa Cruz-area developments, Frieden said. “You wouldn’t buy a house without looking at it,” Frieden said. “We tell them in all our brochures, on every page, ‘Go look at it.’ But in the odd case, they don’t look. They’re gambling.”